Date : February 21, 2008
Now NRIs bet on stocks, real estate
Aheesh BR (37) is a software professional settled in US for the past seven years. Apart from his monthly savings, he transfers a part of his salary to his bank account back home to invest in the Indian equity market. Real estate in India also forms a major part of his investment portfolio.
Non-resident Indians are increasingly inclined towards investing in the Indian stock market and real estate sector. They're picking up stocks of Indian firms that are seen to be fundamentally strong.
"India is growing at a faster pace than other countries and the equity market has outperformed those of developed nations and are likely to continue doing so," says T Srikanth Bhagavat, MD of Hexagon Capital Advisors, explaining why there's so much demand from NRIs for Indian stocks.
Most NRIs are aware of the potential of investments in India but find it difficult to execute a comprehensive plan. Most green card holders have not capitalized on the Indian growth story because of their poor evaluation of the market. NRIs rarely find time from their hectic professional life, they lack proper advice or find handling and monitoring investment transactions inconvenient, says Anand KS of Nile Financial Planners.
Another area of concern expressed by NRIs is the transparency level on charges in various trading sites and other investment options. Remember to ask for details regarding time horizon of investment, risk and return before starting off and opening accounts."A diversified portfolio is recommended for an NRI. We recommend a portfolio based on the investor's risk profile and accordingly include bonds, large cap or sector funds and mostly bluechip (large cap) stocks/funds, as they possess less risk compared to mid caps," says Bhagavat.
"When we have investors from the US, we have to be alert enough to only recommend funds that do not require approval by the US Securities and Exchange Commission (SEC), the agency responsible for administering federal securities laws in the US."
MF investment is one of the best avenues to start with. A combination of debt and equity funds can be used to manage risk. This is operationally the simplest form of investing. "At the next level, an investor comfortable with equity investments can invest directly. Real estate is another sustaining avenue to invest," says Anil Rego, CEO of Right Horizons.
NRIs need to keep in mind the restrictions on many government bonds. An NRI needs to decide if he wants his returns repatriable or not. Repatriable investments would have higher regulations and operationally would be more difficult.
To invest on a repatriable basis, the person must have an NRI or FCNR bank account in India. In this case, the net income or capital gains after tax is eligible for repatriation subject to regulatory guidelines. In the case of investment on a non-repatriation basis, only the net income the dividend arising out of investment is eligible for repatriation.
Dos and Don'ts for NRI investors
SOURCE : ECONOMIC TIMES